Hi, I work full time but last April I also started working freelance as a side hustle. Just going to very simply break down my situation. I pay tax class 2 by direct debit and national employment contributions are sourced from my full time work salary. I have funds put aside for any end of year tax class 4 contributions.
Let's say each month I earned £500 as self-employed.
Paid £30 tax class 2 each month.
Paid myself £350 each month.
Let's say business expenses for the tax year is £1000 (computer equipment)
So, would:
Turnover be 12x£500 = £6,000
Gross profit be £6,000-£1,000 (expenses) = £5,000
Net profit be £6,000 - £1,000 (expenses) - £360 (class 2) = £4,640*
OR Net profit, same as above but also deduct my salary - £4,640 - £4,200 = £440
????
* And this figure is what the tax office will use to determine how much I owe (tax class 4) after submitting my return?
BTW, I'm based in the Isle of Man, if that makes any difference. The self employed tax rate in IOM is 0% for up to £7,176, and 8% for over that amount.
Sorry for the very basic questions here, I kind of know what to expect but would be good to have someone confirm for me. Thanks
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